‘Lifestyle Taxes’ -- Political Camouflage for New Federal Sin Taxes

June 24, 2009

The Senate Finance Committee is pushing for what it calls a “lifestyle tax” to raise funds to pay for President Obama’s $1.2 trillion health care plan. The lifestyle tax -- better known as the sin tax -- would increase the current taxes on wine, beer, and hard liquor and impose new taxes on soft drinks and drinks containing sugar and high fructose corn syrup.

According to the Senate Finance Committee, the new sin taxes will slow the sales of unhealthy products that play a role in obesity. The Finance Committee says the aim of the “lifestyle tax” is to “promote wellness and healthy choices, and curb activities that increase overall health care costs.” The Senate plan includes, among other things, a 19 percent tax increase on alcoholic beverages. The new taxes on sweetened drinks would be applied to soft drinks, fruit juices, sports drinks, and even chocolate milk.

The “lifestyle tax” is just a euphemism for the sin tax, an age-old ploy by elected officials who believe they can tax sinful habits with little organized protest from the “sinners” who smoke, drink, or eat junk food.

Rev. Robert A. Sirico, president and co-founder of the Acton Institute, recently wrote[1] about a growing wave of state and federal sin tax proposals in The American,[1] published by the American Enterprise Institute. Rev. Sirico argues that expanding the sin tax to pay for universal health care will not increase revenues, but do exactly the opposite.

The consequences of the sin tax are often the very opposite of those intended by its designers. Rather than increasing revenue, the sin tax can reduce it. Rather than discouraging what are regarded as morally questionable behaviors, the sin tax can make them more appealing. Rather than reducing what are perceived to be internal costs of the sin, the sin tax can increase them and expand them to society as a whole.

Describing the sin tax as a “lifestyle tax” won’t make these new taxes any more effective as a source of revenue or morally justifiable. And what’s next? New “lifestyle taxes” on morally suspect foods and drinks like junk food, candy bars, cookies and milk shakes?